New Year’s Resolutions for the Nonprofit World

I was recently asked by the Chronicle of Philanthropy to “offer a resolution for the nonprofit world in 2012. In other words, what one thing could nonprofits (or grant makers or philanthropy in general) do to shake things up and improve the way they operate?” I was all too happy to respond, although found that I couldn’t just stop at one….and here’s what I came up with.

1. Factor in growth when deciding how much of an investment and organization should be making in non-program related expenses….and reward rather than penalize high-growth organizations for building strong infrastructures to support increased scale.

2. Explicitly fund overhead – we all have it and we all need it.

3. Please do away with project based funding. I know it makes funders feel good but it does not help our industry to function more effectively. Either you trust someone to take your money and use it effectively, or you don’t.

4. Stop talking about getting non-profits to merge, unless we are willing to put up a retirement fund for the ED that will be asked to leave. In the for-profit sector, mergers happen because the losing CEO gets a financially rewarding exit. If we create similar incentives in the non-profit sector, we will get many more mergers.

5. Require all funders to take the partnership pledge: “I will treat my grantees as true partners and not supplicants, and be conscious of reducing the power imbalance that inherently exists in these relationships.” In return, require all grantees to take the openness pledge: “I will communicate openly and honestly with my funder about the mistakes we are making, what we are learning, and what we are doing to get better.

6. Create an anonymous rating system that allows individuals to provide unbiased feedback to foundations on how responsive, professional and respectful they are to their grantees. Think Trip Advisor for foundations.

7. Move away from measuring only inputs (i.e. cost per participant), and move towards a system of measuring outputs (i.e. return on investment). Think “what is this worth”, versus “what does this cost”, and focus on whether the worth exceeds the cost, and how best to truly measure and prove this. Ultimately, this is a much better indicator of the value that a non-profit adds.

8. Change the way non-profit accounting works to reflect the fact that revenue and capital are not the same thing. When a for-profit company raises capital, it does not increase its revenue, so why do we do this with non-profits? It skews one’s annual report, and shows annual surpluses when they do not actually exist.

9. Pass legislation to provide student loan forgiveness of up to $5k per year for graduate students who choose to work in the non-profit sector.